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White House Proposes Federal Budget Freeze

January 27, 2010

by Emily

Immediately on the heels of an announcement that President Obama would be calling for additional assistance to college graduates struggling to repay student loans, the administration also unveiled a proposal to hold federal discretionary spending to current levels for the next three years, a move that could potentially have serious implications for colleges and students.

Currently, most federal education spending, including student financial aid, is discretionary, not mandatory, so it would fall under the umbrella of the budget freeze. This makes it possible that students will see limited increases to federal grants, work-study, and subsidized student loans in the coming years. The White House has pledged to make education a funding priority, but with states and colleges also struggling financially, it’s quite possible that financial aid programs will see an end to the boost in financial support they’ve received in the last few years.

It’s possible one federal aid program, at least, may be spared from the budget freeze. Last year, President Obama proposed making the Pell Grant an entitlement, putting it in the category of Medicare and other programs that would be exempt from the budget freeze, but the bill to do so still has not passed the Senate. If the bill passes, Pell funding will be mandatory and increases in Pell Grants will be tied to inflation, guaranteeing students a small, but steady, increase in available aid. If not, it’s up to Congress to allocate limited resources for any increases in grant amounts, and with increases in the numbers of college attendees, applications for financial aid, and Pell Grant recipients, it may be all Congress can do to hold funding levels steady for the next three years.

As details of federal and state budgets emerge, and emergency legislation that temporarily boosted funding to schools and student aid begins to be revisited and possibly phased out, exact changes to college funding will become clearer. Already, though, many families are finding paying for college increasingly challenging, even with the aid of college scholarships and grants. There’s a possibility that a federal budget freeze could mean that students in the next few years will see a situation similar to the one that faced students at the start of the last decade, where tuition increased rapidly while federal aid held steady and more and more students came to rely on private student loans.


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